Market Overview

NRG Energy, Inc. Reports Third Quarter 2012 Results and Narrows Guidance to Middle of Range

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PRINCETON, N.J.--(BUSINESS WIRE)--

NRG Energy, Inc. (NYSE: NRG) today reported third quarter 2012 adjusted EBITDA of $657 million with Wholesale contributing $449 million, Retail contributing $173 million and Solar projects contributing $35 million. The Company reported third quarter 2012 net loss of $1 million, or ($0.01) per diluted common share compared, to a net loss of $55 million, or ($0.24) per diluted common share, for the third quarter of 2011.

Adjusted EBITDA for the nine months ended September 30, 2012, was $1,496 million and adjusted cash flow from operations was $993 million. Adjusted cash flow from operations improved $386 million as compared to the nine months ended September 30, 2011, due to improved operational results, reduced interest expense and reductions in collateral postings. Wholesale contributed $928 million of adjusted EBITDA, Retail contributed $504 million of adjusted EBITDA and Solar projects contributed $64 million. Year-to-date 2012 FCF before growth investments was $806 million. Net income for the first nine months of 2012 was $43 million, or $0.16 per diluted common share, compared to net income of $306 million, or $1.22 per diluted common share, for the first nine months of 2011.

“The twin focus of NRG management this quarter has been on achieving in a timely manner all of the milestones, including integration planning, towards closing the GenOn transaction and on delivering a solid third quarter 2012 financial performance. I am pleased to say that we have achieved both,” commented David Crane, NRG's President and Chief Executive Officer. “As we move to realize the substantial EBITDA and cash flow synergies directly created by this powerful merger, we are also preparing to capture the ‘knock on' benefits of the combination in terms of operational cost synergies, retail expansion and the like.”

   

Segment Results

 

Table 1: Adjusted EBITDA

($ in millions) Three Months Ended Nine Months Ended

Segment

  9/30/12   9/30/11   9/30/12   9/30/11
Retail 173   145 504   504
Texas 324 188 689 642
Northeast 58 43 83 94
South Central 31 42 84 106
West 31 34 68 59
Other 16 15 52 43

Alternative Energy(1)

24 (5) 35 (9)
Corporate   -   (4)   (19)   (9)
Adjusted EBITDA(2)   657   458   1,496   1,430

(1) Alternative Energy includes the results of the Company's Solar projects
(2) Detailed adjustments by region are shown in Appendix A

 

Table 2: Net (Loss)/Income

($ in millions)   Three Months Ended   Nine Months Ended
Segment   9/30/12   9/30/11   9/30/12   9/30/11
Retail (300)   36 504   350
Texas 299 (45) (202) 193
Northeast 33 6 (20) (13)
South Central 19 21 - 46
West 35 27 42 51
Other 9 5 25 14
Alternative Energy (9) (12) (40) (42)
Corporate   (87)   (93)   (266)   (293)

Net Income

  (1)   (55)   43   306
 

Retail: Adjusted EBITDA for the third quarter of 2012 was $173 million; $28 million higher than in 2011. Gross margin was favorable by $87 million driven by the acquisition of Energy Plus which added $41 million, with the remaining difference due to increased customer count and usage, lower supply costs and favorable year over year weather impacts. Partially offsetting the higher margin realized in 2012 was an increase in operating costs which were the result of the acquisition of Energy Plus and continued efforts to drive market expansion and customer growth, resulting in an approximate 124,000 increase in customer count since December 31, 2011.

Texas (Generation): Adjusted EBITDA for the third quarter of 2012 was $324 million; $136 million higher compared to the third quarter of 2011. Gross Margin increased $150 million, driven by a combination of 21% higher realized energy margin and improved bi-lateral capacity contracts which together added $194 million. The substantial year-over-year increase in third quarter realized energy margin is largely attributable to the impact of the unprecedented hot weather and resulting ERCOT power price spikes in August of 2011. Partially offsetting the increase was a 13% decline in coal generation due to longer plant outages in 2012.

Northeast: Adjusted EBITDA for the third quarter of 2012 was $58 million; $15 million higher compared to the third quarter of 2011. The increase was driven by higher gross margin of $16 million as the Northeast benefited from additional energy sales to the Company's retail providers as a result of efforts to expand its retail presence in the region. Also contributing to the positive results were more favorable capacity pricing in the PJM markets and increased revenues resulting from the Reliability Support Services Agreement in Western New York.

South Central: Adjusted EBITDA for the third quarter of 2012 was $31 million; $11 million lower than the third quarter 2011. Gross margin in 2012 decreased by $10 million versus the third quarter of 2011 due to 12% lower average realized prices. The region experienced a 5% decline in coal generation that was partially offset by a 10% increase in generation at Cottonwood as compared to the third quarter of 2011.

West: Adjusted EBITDA for the third quarter of 2012 was $31 million; $3 million lower than the third quarter 2011 due to a decrease in capacity revenues partially offset by an increase in unrealized trading activity.

Alternative Energy: Adjusted EBITDA for the third quarter of 2012 was $24 million; up $29 million from 2011. Gross margin was $55 million, a $45 million increase driven by the addition of the Roadrunner facility, which began commercial operations in late 2011 and the addition of the Company's Agua Caliente solar facility, which as of September 30, 2012 had reached commercial operations on 230 MWs. Offsetting the improved margin were NRG's continued development efforts in our other new businesses.

 

Liquidity and Capital Resources

 

Table 3: Corporate Liquidity

($ in millions)

9/30/12

6/30/12

12/31/11

Cash and Cash Equivalents 1,610 1,149 1,105
Funds deposited by counterparties 76 135 258
Restricted cash 237 208 292
Total Cash and Funds Deposited 1,923 1,492 1,655
Revolver Availability 1,133 1,049 673
Total Liquidity 3,056 2,541 2,328

Less: Funds deposited as collateral by hedge counterparties

(76) (135) (258)
Total Current Liquidity 2,980 2,406 2,070
Less: Reserve for 2017 bond redemption(1) (270) - -
Total Current Liquidity, adjusted 2,710 2,406 2,070

(1) On October 24th, NRG redeemed the remaining $270 million outstanding of the 2017 Senior Notes

Total liquidity, adjusted as of September 30, 2012, was $2,710 million, an increase of $640 million from December 31, 2011 driven largely by a $460 million increase in Revolver availability primarily due to the sell-down of the Agua Caliente project. The $55 million decrease in restricted cash is primarily due to reduced collateral requirements for the Company's solar projects as NRG continues to contribute equity to these projects. Finally, cash and cash equivalents increased by $235 million due to the following items:

  • $993 million of adjusted cash flow from operations;
  • $174 million in proceeds from the sale of Schkopau;
  • $122 million in proceeds from the sell down of the Agua Caliente project;
  • Partially offset by $1,013 million of cash outflows consisting of the following items:
    • $180 million of cash paid for maintenance and environmental capital expenditures (net of financing of $9 million);
    • $527 million for solar and conventional growth investments (net of debt and third party funding of $1,704 million);
    • $172 million net paydown of Senior Unsecured Notes and $46 million of scheduled debt amortization; and
    • $47 million of changes in dividends, restricted cash and other investing and financing activities

Growth Initiatives and Developments

NRG continued to advance its leadership position in sustainable energy including:

Solar

  • Agua Caliente – As of September 30, 2012, 230 MWs of generation capacity have achieved commercial operation making Agua Caliente the largest operating solar PV project in the United States. Overall, construction at Agua Caliente is several months ahead of schedule. Power generated by Agua Caliente will be sold under a 25-year power purchase agreement (PPA) with Pacific Gas and Electric Co (PG&E).
  • CVSR – Construction of the California Valley Solar Ranch project is well advanced, with 22 MWs achieving operation on September 19, 2012. We continue to expect all other phases of the project to be completed earlier than the dates anticipated at the time the project was acquired, with 125 MWs on-line by the end of 2012 and the remaining 125 MWs completed in the third and fourth quarter of 2013. Power from this project will be sold to PG&E under 25-year PPAs.
  • Ivanpah – Unit 1 (124 MWs) is expected to produce its first steam in January 2013 and be completed and producing power in May 2013. The remaining two units (each at 127 MWs) are currently expected to be completed in the third and fourth quarter of 2013. Power from Units 1 and 3 will be sold to PG&E via two 25-year PPAs, and power from Unit 2 will be sold to Southern California Edison under a 20-year PPA.
  • Other Solar – NRG Solar also has several other smaller projects under construction that are expected to reach commercial operation within 2012; ranging from the Borrego project (26 MWs under a 25-year PPA with San Diego Gas and Electric) to smaller Distributed Generation scale installations, such as our “showcase” solar projects currently operating or under construction at four NFL stadiums.

Alternative Energy

  • Petra Nova – Petra Nova continues with the development of its peaking unit at NRG's WA Parish Generating Station and on August 14, 2012 signed a $24 million lump-sum, turnkey EPC contract. Petra Nova is targeting a May 2013 commercial operation date, and it is anticipated that the unit will eventually be used as a cogeneration facility dedicated to a Carbon Capture Utilization and Storage Project, sponsored in part by the Department of Energy, at the Parish facility. The peaking unit is being financed, in part with the proceeds of a $54 million tax-exempt bond financing that was completed on May 3, 2012, of which NRG has drawn $16 million through September 30, 2012.

Guidance Update

Notwithstanding the comparatively mild summer weather on the back of extremely mild weather last winter, NRG is pleased to narrow its adjusted EBITDA guidance for 2012 to the center of the previous range. For fiscal year 2012, NRG projects $1,875-$1,925 million of adjusted EBITDA on a standalone basis with Wholesale contributing $1,170-$1,195 million, Retail contributing $630-$650 million and Solar projects contributing $75-80 million. The Company is also narrowing its free cash flow before growth investments guidance range to $900-$950 million. For fiscal years 2013 and 2014, NRG also affirms the standalone guidance previously given.

 

Table 4: 2012 Reconciliation of Adjusted EBITDA Guidance

($ in millions) 11/2/12 8/8/12
Adjusted EBITDA guidance 1,875– 1,925 1,825 – 2,000
Interest payments (659) (605)
Income tax (30) (50)
Collateral/working capital/other changes (36) (94)
Adjusted cash flow from operations 1,150 – 1,200 1,050 – 1,250
Maintenance capital expenditures,net (232) (240)-(260)
Environmental capital expenditures, net (6) (5)-(15)
Preferred dividends (9) (9)
Free cash flow – before growth investments 900 – 950 800 – 1,000

Note: Subtotals and totals are rounded

 

2012 Capital Allocation Program

On September 24, 2012, NRG issued $990 million aggregate principal amount at par of 6.625% Senior Notes due 2023. The Company used the net proceeds, $978 million, and additional cash on hand to redeem $820 million of the 2017 Notes through a tender offer at an early redemption percentage of 104.125%, with the remaining $270 million of notes redeemed during October. This refinancing reduces corporate debt by $100 million, decreases annual interest expense by $14 million and creates a single covenant package across credit facilities and debt securities enabling the Company to invest more opportunistically in growth initiatives and enhance its ability to efficiently return capital to all investors.

Earnings Conference Call

On November 2, 2012, NRG will host a conference call at 8:30 am eastern to discuss these results. Investors, the news media and others may access the live webcast of the conference call and accompanying presentation materials by logging on to NRG's website at http://www.nrgenergy.com and clicking on “Investors.” The webcast will be archived on the site for those unable to listen in real time.

About NRG

NRG is at the forefront of changing how people think about and use energy. A Fortune 500 company, NRG is a pioneer in developing cleaner and smarter energy choices for our customers: whether as one of the largest solar power developers in the country, or by building the first privately funded electric vehicle charging infrastructure or by giving customers the latest smart energy solutions to better manage their energy use. Our diverse power generating facilities can support over 20 million homes and our retail electricity providers—Reliant, Green Mountain Energy Company and Energy Plus—serve more than two million customers. More information is available at nrgenergy.com. Connect with NRG Energy on Facebook and follow us on Twitter @nrgenergy.

Safe Harbor Disclosure

In addition to historical information, the information presented in this report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. These statements involve estimates, expectations, projections, goals, assumptions, known and unknown risks and uncertainties and can typically be identified by terminology such as "may," "will," "should," "could," "objective," "projection," "forecast," "goal," "guidance," "outlook," "expect," "intend," "seek," "plan," "think," "anticipate," "estimate," "predict," "target," "potential" or "continue" or the negative of these terms or other comparable terminology. Such forward-looking statements include, but are not limited to, statements about the anticipated benefits of the proposed transaction between NRG and GenOn, each party's and the combined company's future revenues, income, indebtedness, capital structure, plans, expectations, objectives, projected financial performance and/or business results and other future events, each party's views of economic and market conditions, and the expected timing of the completion of the proposed transaction.

Forward-looking statements are not a guarantee of future performance and actual events or results may differ materially from any forward-looking statement as result of various risks and uncertainties, including, but not limited to, those relating to: the ability to satisfy the conditions to the proposed transaction between NRG and GenOn, the ability to successfully complete the proposed transaction (including any financing arrangements in connection therewith) in accordance with its terms and in accordance with expected schedule, the ability to obtain stockholder, regulatory or other approvals for the proposed transaction, or an inability to obtain them on the terms proposed or on the anticipated schedule, diversion of management attention on transaction-related issues, impact of the transaction on relationships with customers, suppliers and employees, the ability to finance the combined business post-closing and the terms on which such financing may be available, the financial performance of the combined company following completion of the proposed transaction, the ability to successfully integrate the businesses of NRG and GenOn, the ability to realize anticipated benefits of the proposed transaction (including expected cost savings and other synergies) or the risk that anticipated benefits may take longer to realize than expected, legislative, regulatory and/or market developments, the outcome of pending or threatened lawsuits, regulatory or tax proceedings or investigations, the effects of competition or regulatory intervention, financial and economic market conditions, access to capital, the timing and extent of changes in law and regulation (including environmental), commodity prices, prevailing demand and market prices for electricity, capacity, fuel and emissions allowances, weather conditions, operational constraints or outages, fuel supply or transmission issues, hedging ineffectiveness.

Additional information concerning other risk factors is contained in NRG's and GenOn's most recently filed Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings.

Many of these risks, uncertainties and assumptions are beyond NRG's ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made, and NRG does not undertake any obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this communication. All subsequent written and oral forward-looking statements concerning NRG, GenOn, the proposed transaction, the combined company or other matters and attributable to NRG, GenOn or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above.

Additional Information about the Proposed Transaction and Where You Can Find It

In connection with the proposed merger between NRG and GenOn, NRG filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 that includes a joint proxy statement of NRG and GenOn and that also constitutes a prospectus of NRG. The registration statement was declared effective by the SEC on October 5, 2012. NRG and GenOn first mailed the joint proxy statement/prospectus to their respective stockholders on or about October 10, 2012. NRG and GenOn may also file other documents with the SEC regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS OF NRG AND GENON ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and stockholders may obtain free copies of the joint proxy statement/prospectus and other documents containing important information about NRG and GenOn through the website maintained by the SEC at www.sec.gov. In addition, NRG makes available free of charge at www.nrgenergy.com (in the “Investors” section), copies of materials it files with, or furnish to, the SEC.

Participants In The Merger Solicitation

NRG, GenOn, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of NRG and GenOn in connection with the proposed transaction. Information about the directors and executive officers of NRG is set forth in its proxy statement for its 2012 annual meeting of stockholders, which was filed with the SEC on March 12, 2012. Information about the directors and executive officers of GenOn is set forth in its proxy statement for its 2012 annual meeting of stockholders, which was filed with the SEC on March 30, 2012. Other information regarding the participants in the proxy solicitation can be found in the above-referenced registration statement on Form S-4. These documents can be obtained free of charge from the sources indicated above.

     
 

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 

Three months ended September 30,

Nine months ended September 30,

2012   2011 2012   2011

(In millions, except for per share amounts)

Operating Revenues

Total operating revenues

$2,331 $2,674 $6,359 $6,947
Operating Costs and Expenses

Cost of operations

1,726 2,053 4,618 4,985

Depreciation and amortization

239 238 703 665

Impairment charge on emissions allowance

 

160

 

160

Selling, general and administrative

253 169 681 479

Acquisition-related transaction and integration costs

18 18

Development costs

9 11 26 32

Total operating costs and expenses

2,245 2,631 6,046 6,321
Operating Income 86 43 313 626

Other Income/(Expense)

Equity in earnings of unconsolidated affiliates

4 16 26 26

Impairment charge on investment

(1) (3) (2) (495)

Other income, net

10 5 14 13

Loss on debt extinguishment

(41) (32) (41) (175)

Interest expense

(163) (164) (495) (504)

Total other expense

(191) (178) (498) (1,135)
Loss Before Income Taxes (105) (135) (185) (509)

Income tax benefit

(113) (80) (246) (815)
Net Income/(Loss) 8 (55) 61 306

Less: Net income attributable to noncontrolling interest

9 18
Net Income/(Loss) Attributable to NRG Energy, Inc. (1) (55) 43 306

Dividends for preferred shares

2 2 7 7
(Loss) /Income Available for Common Stockholders ($3) ($57) $36 $299
 
(Loss) Earnings Per Share Attributable to NRG Energy, Inc. Common Stockholders
 

Weighted average number of common shares outstanding — basic

228 240 228 243

Net (Loss)/Income per weighted average common share — basic

($0.01) ($0.24) $0.16 $1.23

Weighted average number of common shares outstanding —diluted

228 240 230 245

Net (Loss)/Income per weighted average common share —diluted

($0.01) ($0.24) $0.16 $1.22
Dividends Per Common Share $0.09 $— $0.09 $—
     
 

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
(Unaudited)

 

Three months ended
September 30,

Nine months ended
September 30,

2012   2011 2012   2011
Net Income/(Loss) $8 ($55) $61 $306
Other Comprehensive (Loss)/Income net of tax

Unrealized loss on derivatives, net of income tax benefit of $24, $45, $76 and $131

(43) (76) (132) (225)

Foreign currency translation adjustments, net of income tax benefit (expense) of $0, $16, $1 and $4

1 (27) (1) (5)

Reclassification adjustment for translation gain realized upon sale of Schkopau, net of income tax benefit of $6,$0,$6 and $0

(11) (11)
Available –for-sale securities, net of income tax benefit of ($1), $1, ($1) and $1 2 (1) 2 (2)
Defined benefit plans 1
Other comprehensive loss (51) (104) (142) (231)
Comprehensive ( Loss)/Income (43) (159) (81) 75
Less: Comprehensive income attributable to noncontrolling interest 9 18
Comprehensive (Loss )/Income Attributable to NRG Energy, Inc. (52) (159) (99) 75
Dividends for preferred shares 2 2 7 7
Comprehensive (Loss )/Income available for common stockholders $54 ($161) ($106) $68
   
 

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 

September 30, 2012

December 31, 2011

 

(In millions, except shares)

(unaudited)
ASSETS
Current Assets
Cash and cash equivalents

$

1,610

$

1,105

Funds deposited by counterparties 76 258
Restricted cash 237 292
Accounts receivable — trade, less allowance for doubtful accounts of $39 and $23 1,075 834
Inventory 393 308
Derivative instruments 2,677 4,216
Cash collateral paid in support of energy risk management activities 98 311
Prepayments and other current assets 217 273
Total current assets 6,383 7,597
Property, plant and equipment, net of accumulated depreciation of $5,194 and $4,570 15,866 13,621
Other Assets
Equity investments in affiliates 649 640
Note receivable — affiliate and capital leases, less current portion 78 342

Goodwill

1,886

1,886
Intangible assets, net of accumulated amortization of $1,628 and $1,452 1,188 1,419
Nuclear decommissioning trust fund 469 424
Derivative instruments 309 450
Other non-current assets 392 336
Total other assets 4,971 5,497
Total Assets

$

27,220

$

26,715

 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt and capital leases

$

374

$

87

Accounts payable 1,246 808
Derivative instruments 2,462 3,751
Deferred income taxes 15 127
Cash collateral received in support of energy risk management activities 76 258
Accrued expenses and other current liabilities 604 640
Total current liabilities 4,777 5,671
Other Liabilities
Long-term debt and capital leases 10,968 9,745
Nuclear decommissioning reserve 349 335
Nuclear decommissioning trust liability 277 254
Deferred income taxes 1,092 1,389
Derivative instruments 561 464
Out-of-market commodity contracts 161 183
Other non-current liabilities 896 756
Total non-current liabilities 14,304 13,126
Total Liabilities 19,081 18,797
3.625% convertible perpetual preferred stock (at liquidation value, net of issuance costs) 249 249
Commitments and Contingencies
Stockholders' Equity
Common stock 3 3
Additional paid-in capital 5,388 5,346
Retained earnings 4,002 3,987
Less treasury stock, at cost — 76,505,718 and 76,664,199 shares, respectively

(1,920)

(1,924)

Accumulated other comprehensive (loss) income (68) 74
Noncontrolling interest 485 183
Total Stockholders' Equity 7,890 7,669
Total Liabilities and Stockholders' Equity

$

27,220

$

26,715

   
 

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

Nine months ended September 30

  2012

 

  2011

(In millions)
Cash Flows from Operating Activities

Net income

$61

$306

Adjustments to reconcile net loss to net cash provided by operating activities:

Distributions and equity in earnings of unconsolidated affiliates 8 8
Depreciation and amortization 703 665
Provision for bad debts 40 41
Amortization of nuclear fuel 29 31
Amortization of financing costs and debt discount/premiums 25 25
Loss on debt extinguishment 8 58
Amortization of intangibles and out-of-market commodity contracts 108 118
Amortization of unearned equity compensation 27 14
Changes in deferred income taxes and liability for uncertain tax benefits

(261)

(829)

Changes in nuclear decommissioning trust liability 25 20
Changes in derivative instruments 360

(201)

Changes in collateral deposits supporting energy risk management activities

213

7
Impairment charge on investment 481
Impairment charge on emission allowances 160
Cash used by changes in other working capital

(288)

 

(236)

Net Cash Provided by Operating Activities

1,058

  668
Cash Flows from Investing Activities
Acquisitions of business, net of cash acquired (40) (352)
Capital expenditures

(2,474)

(1,355)

Increase in restricted cash, net

(96)

(92)

Decrease /(increase) in restricted cash to support equity requirements for U.S. DOE funded projects 151 (316)
(Increase)/decrease in notes receivable

(22)

27
Purchase of emissions allowances (8) (27)
Proceeds from sale of emission allowances 8 6
Investments in nuclear decommissioning trust fund securities

(341)

(314)

Proceeds from sales of nuclear decommissioning trust fund securities 316 294
Proceeds from renewable energy grants 49
Proceeds from sale of assets, net of cash disposed of 137 14
Investments in unconsolidated affiliates (17)
Other (9)  

(29)

Net Cash Used by Investing Activities

(2,329)

 

(2,161)

Cash Flows from Financing Activities
Payment of dividends to common and preferred stockholders

(28)

(7)

Payment for treasury stock

(378)

Net payments for settlement of acquired derivatives that include financing elements

(65)

(61)

Sale proceeds and other contributions from noncontrolling interests in subsidiaries 316
Proceeds from issuance of long-term debt 2,541 5,710
Decrease in restricted cash supporting funded letter of credit 1,300
Payment for settlement of funded letter of credit facility (1,300)
Proceeds from issuance of common stock 2
Payment of debt issuance and hedging costs

(30)

(149)

Payments for short and long-term debt

(955)

 

(5,450)

Net Cash Provided/(Used) by Financing Activities 1,779  

(333)

Effect of exchange rate changes on cash and cash equivalents (3)   2
Net Increase/( Decrease) in Cash and Cash Equivalents

505

(1,824)

Cash and Cash Equivalents at Beginning of Period 1,105   2,951
Cash and Cash Equivalents at End of Period $ 1,610  

$ 1,127

                 

Appendix Table A-1: Third Quarter 2012 Regional Adjusted EBITDA Reconciliation
The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
(dollars in millions)   Retail   Texas   Northeast  

South
Central

  West  

Other
Conventional

 

Alt.
Energy

  Corp.   Total
Net Income/(Loss)   (300)   299   33   19   35   9   -   (87)   8
Plus:
Net Income Attributable to Non-Controlling Interest - - - - - - (9) - (9)
Income Tax - - - - - - - (113) (113)
Interest Expense 1 - 4 5 1 3 12 137 163
Depreciation, Amortization and ARO Expense 41 116 32 23 4 4 18 4 242
Loss on Debt Extinguishment - - - - - - 41 41
Amortization of Contracts   16   13   -   (6)   -   -   -   -   23
EBITDA (242) 428 69 41 40 16 21 (18) 355
Transaction Costs - - - - - - - 14 14
Legal Settlement - - - 14 - - - - 14
Asset and Investment Write-offs - 7 - - - - - 4 11
MtM losses/(gains) 415 (111) (11) (24) (9) - 3 - 263
                                     
Adjusted EBITDA   173   324   58   31   31   16   24   -   657
                 

Appendix Table A-2: Third Quarter 2011 Regional Adjusted EBITDA Reconciliation
The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
(dollars in millions)   Retail   Texas   Northeast  

South
Central

  West  

Other
Conventional

 

Alt.
Energy

  Corp.   Total
Net Income/(Loss)   36   (45)   6   21   27   5   (12)   (93)   (55)
Plus:
Income Tax - - - - - 2 - (82) (80)
Interest Expense 1 - 11 11 - 4 5 132 164
Depreciation, Amortization and ARO Expense 48 118 33 23 2 4 7 4 239
Loss on Debt Extinguishment - - - - - - - 32 32
Amortization of Contracts   25   14   -   (6)   -   -   -   -   33
EBITDA 110 87 50 49 29 15 - (7) 333
Asset and Investment Write-offs - 168 - - - - - 3 171
MtM losses/(gains) 35 (67) (7) (7) 5 - (5) - (46)
                                     
Adjusted EBITDA   145   188   43   42   34   15   (5)   (4)   458
                 

Appendix Table A-3: YTD Third Quarter 2012 Regional Adjusted EBITDA Reconciliation
The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
(dollars in millions)   Retail   Texas   Northeast  

South
Central

  West  

Other
Conventional

 

Alt.
Energy

  Corp.   Total
Net Income/(Loss)   504   (202)   (20)   -   42   25   (22)   (266)   61
Plus:
Net Income Attributable to Non-Controlling Interest - - - - - - (18) - (18)
Income Tax - - - - - 4 - (250) (246)
Interest Expense 3 - 13 14 1 10 34 420 495
Depreciation, Amortization and ARO Expense 126 345 97 69 11 12 41 8 709
Loss on Debt Extinguishment - - - - - - 41 41
Amortization of Contracts   83   32   -   (15)   -   1   -   -   101
EBITDA 716 175 90 68 54 52 35 (47) 1,143
Transaction Costs - - - - - - - 23 23
Legal Settlement - - - 14 20 - - - 34
Asset and Investment Write-offs - 8 - - - - - 5 13
MtM losses/(gains) (212) 506 (7) 2 (6) - - - 283
                                     
Adjusted EBITDA   504   689   83   84   68   52   35   (19)   1,496
                 

Appendix Table A-4: YTD Third Quarter 2011 Regional Adjusted EBITDA Reconciliation
The following table summarizes the calculation of adjusted EBITDA and provides a reconciliation to net income/ (loss)

 
(dollars in millions)   Retail   Texas   Northeast  

South
Central

  West  

Other
Conventional

 

Alt.
Energy

  Corp.   Total
Net Income/(Loss)   350   193   (13)   46   51   14   (42)   (293)   306
Plus:
Income Tax (3) - - - - 6 - (818) (815)
Interest Expense 3 (16) 38 32 1 12 12 422 504
Depreciation, Amortization and ARO Expense 114 349 90 65 9 11 22 10 670
Loss on Debt Extinguishment - - - - - - - 175 175
Amortization of Contracts   118   43   -   (16)   -   -   -   -   145
EBITDA 582 569 115 127 61 43 (8) (504) 985
Asset and Investment Write-offs - 168 - - - - - 495 663
MtM losses/(gains) (78) (95) (21) (21) (2) - (1) - (218)
                                     
Adjusted EBITDA   504   642   94   106   59   43   (9)   (9)   1,430
       

Appendix Table A-5: YTD Third Quarter 2012 Free Cash Flow before Growth Investments Reconciliation
The following table summarizes the calculation of free cash flow before growth investments and adjusted cash flow from operating activities providing a reconciliation to net cash provided by operating activities

 
($ in millions)

Nine months ended September 30, 2012

Nine months ended September 30, 2011

Net Cash Provided by Operating Activities 1,058 668
Less: Reclassifying of net payments for settlement of acquired derivatives that include financing elements     (65)     (61)
Adjusted Cash Flow from Operating Activities    

993

    607
Maintenance Capital Expenditures (151) (163)
Environmental Capital Expenditures, net (29) (23)
Preferred Dividends     (7)     (7)
Free Cash Flow – Before Growth Investments     806     414

EBITDA and adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance. The presentation of adjusted EBITDA should not be construed as an inference that NRG's future results will be unaffected by unusual or non-recurring items.

EBITDA represents net income before interest (including loss on debt extinguishment), taxes, depreciation and amortization. EBITDA is presented because NRG considers it an important supplemental measure of its performance and believes debt-holders frequently use EBITDA to analyze operating performance and debt service capacity. EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:

  • EBITDA does not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
  • EBITDA does not reflect changes in, or cash requirements for, working capital needs;
  • EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
  • Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
  • Other companies in this industry may calculate EBITDA differently than NRG does, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA should not be considered as a measure of discretionary cash available to use to invest in the growth of NRG's business. NRG compensates for these limitations by relying primarily on our GAAP results and using EBITDA and adjusted EBITDA only supplementally. See the statements of cash flow included in the financial statements that are a part of this news release.

Adjusted EBITDA is presented as a further supplemental measure of operating performance. Adjusted EBITDA represents EBITDA adjusted for mark-to-market gains or losses, asset write offs and impairments; and factors which we do not consider indicative of future operating performance. The reader is encouraged to evaluate each adjustment and the reasons NRG considers it appropriate for supplemental analysis. As an analytical tool, adjusted EBITDA is subject to all of the limitations applicable to EBITDA. In addition, in evaluating adjusted EBITDA, the reader should be aware that in the future NRG may incur expenses similar to the adjustments in this news release.

Adjusted cash flow from operating activities is a non-GAAP measure NRG provides to show cash from operations with the reclassification of net payments of derivative contracts acquired in business combinations from financing to operating cash flow. The Company provides the reader with this alternative view of operating cash flow because the cash settlement of these derivative contracts materially impact operating revenues and cost of sales, while GAAP requires NRG to treat them as if there was a financing activity associated with the contracts as of the acquisition dates.

Free cash flow (before growth investments) is adjusted cash flow from operations less maintenance and environmental capital expenditures and preferred stock dividends and is used by NRG predominantly as a forecasting tool to estimate cash available for debt reduction and other capital allocation alternatives. The reader is encouraged to evaluate each of these adjustments and the reasons NRG considers them appropriate for supplemental analysis. Because we have mandatory debt service requirements (and other non-discretionary expenditures) investors should not rely on free cash flow as a measure of cash available for discretionary expenditures.

Media:
Jerianne Thomas, 713-537-2087
Lori Neuman, 609-524-4525
Dave Knox, 713-537-2130
or
Investors:
Chad Plotkin, 609-524-4526
Stefan Kimball, 609-524-4527

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